Secrecy and Patents: Evidence from the Uniform Trade Secrets Act, March 18, 2016

Dr. Png is a Distinguished Professor in the School of Business and Department of Economics at the National University of Singapore. His research focuses on the economics of innovation. He is the author of Managerial Economics, which has been published in multiple editions. Dr Png was a nominated MP (10th Parliament of Singapore), 2005-06, and member of the Trustworthy Computing Academic Advisory Board, Microsoft Corporation, 2006-10.

Abstract: Stronger trade secrets law affects patenting in conflicting ways. It raises the return to commercialization and increases the exploitation of inventions, and so, increases patenting. However, for each particular invention, businesses may substitute secrecy for patents. Here, I exploit differences in the timing of the Uniform Trade Secrets Act (UTSA) in U.S. states and the impact on manufacturers with different geographic distribution of R&D to study the effect of stronger trade secrets law on patenting. The UTSA was associated with 19.5 percent fewer patents in complex technology industries but no significant effect in discrete technology industries. Further, the UTSA was associated with relatively greater reduction of patenting of larger inventions, among larger companies which are technology laggards, and in less competitive industries.